Chapter 4: Organizing

Legal Forms of Organizations:

Form # Owners Liability Comments

 Simple to run
 Decisions made by owner
Sole Proprietorship 1 For all debt
 Increasing capital is difficult
 Lifespan = owner life
 Wider pool to draw resources and
For all debt
Partnership >1 decisions/ideas from.
Distributed by share size
 Divided decision making
 Wider pool to draw resources
from
 Easier to change management
Corporation >1 For investment  Longer life
 Expensive and difficult to
organize
 Legally complex
Cooperatives >1 Equal distribution 

Organizing:
Organizing is:
1. Identification and classification of required activities.
2. Grouping of activities necessary to attain objectives.
3. Assigning of each grouping to a manager with the authority necessary to supervise it.
4. Provision for coordination horizontally and vertically in the organization structure.

Key Activities:
They are the primary activities for which the organization exists. These are the activities that
answer the questions:
1. In what area is excellence required to obtain the company’s objectives?
2. In what areas would lack of performance endanger the results, if not the survival, of
the enterprise?
3. What are the values that are truly important to us in the company?

For each “key activity” we need to conduct “decision analysis” and “relation analysis”

Organizational Structures:

Departmentalization: The division of organizations into smaller units

The type of structure needed is dependent on the organization, its size, products, and market.
The stages of departmentalization are:
1. Primitive Organization: Used for very small companies. Usually sole owner with very
few employees.
2. Functional: As company grows and there is a need for specialized individuals we start
developing departments formed around specific functions. This can further be expanded
by having sub-functions under a given function (e.g., Marketing ==> Marketing, Sales,
and Market Research)
3. Product: For companies with products requiring distinctly different production or
marketing methods, then it can divide along product line.
4. Geographic/Territorial: When sales regions are widespread and diverse, an organization
can develop a Geographic structure.
5. Customer: Departmentalization along “customer” type is used when company has distinct
customers requiring distinct marketing and sales approaches.

Many larger organizations use a combination of these structures.

Actual structure is driven by need.

Span of Control:
Span of Control defines the number of employees reporting to a single manager/supervisor.

Less Span = More levels

Greater Span = Less Levels

Factors affecting span:

 Subordinate training:
o Better trained subordinates = less supervision required
 Nature of jobs supervised
o Simple, similar, or physically close jobs = less supervision required
o Complex, dissimilar, distant jobs = more supervision is required
 Rate of change of activities and personnel:
o Rapidly changing situations and personnel require greater supervision.
 Clarity of instruction and delegation:
o Clearly defined, described, and delegated work requires less supervision.
 Staff Assistance: The existence of support staff and their ability affect level of required
supervision

Larger Spans of Control (20 – 30 subordinates) leads to:

 Reduction in administrative costs
 More effective and efficient organization communication
 Faster decisions and interaction between organizational levels
 Increased requirement for better training, communication, and education at all levels.
 Better leadership at all levels.
Line and Staff Relationships
Line Functions: Those that accomplish the main mission or objectives of the organization
Staff Functions: Those that help the line accomplish its objectives by providing some sort of
service or advice.
Line Relationships: superior – subordinate relationships.

Technology and Organizations:

Type Production Volume Worker Skill Equipment Management

Stages or small Small General
Unit High skill level Organic
batches quantities equipment
Many stages, Large Moderate skill Specialized
Mass Mechanistic
large batches quantities level equipment
Continuous Large High
Process High skill level Organic
process volume automation

Teams:A small number of people who are committed to a common goal and an approach to this
goal that they are mutually accountable for reaching.
Use of complimentary skills.
Crosses functional/departmental lines
Disposable